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De Lage Landen Financial Services, Inc. v. Viewpoint Computer Animation

March 11, 2009

DE LAGE LANDEN FINANCIAL SERVICES, INC., PLAINTIFF,
v.
VIEWPOINT COMPUTER ANIMATION, INC., DEFENDANT,
v.
3COM CORP. AND CAPITAL 4, INC., THIRD PARTY DEFENDANTS AND DEFENDANTS ON THE COUNTERCLAIM.



The opinion of the court was delivered by: Baylson, J.

MEMORANDUM

Presently before this Court is Plaintiff De Lage Landen's (hereinafter "DLL" or "Plaintiff") Motion to Dismiss the Amended Counterclaim of Defendant Viewpoint Computer Animation, Inc. (hereinafter "Viewpoint" or "Defendant") for failure to state a claim under Fed. R. Civ. P. 12(b)(6). This dispute arises from a series of contracts entered into by DLL, Viewpoint, and additional third parties for the provision of telephone services and equipment. For the foregoing reasons, this Court will deny in part and grant in part, with leave to amend.

I. Factual Background

The specific facts asserted in this case differ between the Complaint and Counterclaim, so this Court will describe each document's factual assertions separately.

A. Complaint

DLL, a Michigan corporation with a place of business in Pennsylvania, asserts that it entered a Business Communications Lease Agreement (hereinafter "Rental Agreement" or "Funding Agreement") with Viewpoint, a Massachusetts corporation, on October 12, 2005. (Compl. ¶ 5). Pursuant to the Rental Agreement, Viewpoint allegedly leased phone equipment from DLL with monthly payments of $3,594.10. (Id. ¶¶ 6, 10). This payment included a $691.16 per month "pass through" payment to Third Party Defendant and Defendant on the Counterclaim, Capital 4, Inc. (hereinafter "Capital 4"), a Texas corporation. (Id. ¶ 11). DLL alleges that Capital 4 provided telephone services to Viewpoint pursuant to a Power of $Zero Customer Agreement between Capital 4 and Viewpoint (hereinafter "Customer Agreement"). (Id. ¶ 9).

According to DLL, Capital 4 became insolvent and stopped providing services to Viewpoint in September 2007. (Id. ¶ 12). DLL claims that it reduced Viewpoint's lease payments by the amount of the pass through payment in October 2007. (Id. ¶ 13). DLL asserts that Viewpoint stopped making its lease payments under the Rental Agreement. (Id. ¶ 14). DLL alleges that the Rental Agreement contained a clause stating that DLL was not responsible for providing maintenance and / or service for the equipment; that any claims regarding maintenance and / or service must be made to the supplier or manufacturer; and that such claims did not affect Viewpoint's obligations to make all required lease payments. (Id. ¶ 8).

DLL then filed this suit against Viewpoint, claiming breach of contract and unjust enrichment. (Id. ¶¶ 17-22). The Rental Agreement contained a choice-of-law provision selecting Pennsylvania law to govern any issues arising under that contract, as well as a forum selection clause also choosing Pennsylvania as the non-exclusive jurisdiction. (Id. Ex. A ¶ 22).

B. Counterclaim

Viewpoint has brought counterclaims against DLL as well as claims against Capital 4 and another party, 3Com Corporation (hereinafter "3Com"), the manufacturer of the communications equipment allegedly provided under the Rental Agreement.

Viewpoint alleges many additional facts in its forty-nine page, one hundred sixty-eight paragraph Facts section of its Amended Answer, Affirmative Defenses, Amended Counterclaim, and Third Party Complaint (hereinafter "Counterclaim"). Viewpoint's central allegation is that its Rental Agreement with DLL was only one of a complex series of contracts and relationships between itself, DLL, Capital 4, and 3Com. Based on the inter-relationships between these contracts, Viewpoint argues that its obligation to pay DLL was extinguished when Capital 4 stopped providing telecommunications services.*fn1 A more detailed account follows.

Viewpoint alleges that in January 2004 Capital 4 developed a program for selling telecommunication services to businesses, which it branded the "Power of $Zero Program" (hereinafter "Program"). (Countercl. ¶ 54). Pursuant to a Customer Agreement with Capital 4, customers would receive all of their telecommunications services-local and long distance phone, cellular phone, and internet services-for three to seven years at a flat monthly rate plus either free telephone equipment from 3Com, a cash bonus, or a combination of both. (Countercl. ¶ 55(a)-(b)). Under the Program, Viewpoint asserts that Capital 4 would arrange for a customer to borrow money from an equipment leasing company, such as DLL, and the customer would repay the borrowed money with interest, pursuant to a Rental Agreement with the leasing company. (Countercl. ¶ 55(b)). The leasing company then paid the borrowed money to Capital 4, which in turn used most of the money to provide the telephone services for the customers. (Countercl. ¶ 55(b), (f)). Capital 4 did not provide services itself but instead contracted with licensed telephone service companies. (Countercl. ¶ 55(h)). Viewpoint alleges that Capital 4 represented that if Capital 4 failed to deliver services, the customer could cancel and owe nothing. (Countercl. ¶ 55(c)). In addition, Viewpoint alleges the Program contained a warranty for service if Capital 4 became insolvent. (Countercl. ¶ 55(e)).

Viewpoint further alleges that Capital 4 would make a small payment from the borrowed money to 3Com (if the customer chose the free equipment option) or to the customer (if the customer chose the cash bonus option). (Countercl. ¶ 54(d)). Capital 4 would also make a small payment to any value-added reseller who sold the program to the customer. (Countercl. ¶ 54(e)). Viewpoint claims that the customer would then make monthly payments to the leasing company to repay its loan, and any excess amount not needed to repay the loan would "pass through" from the leasing company to Capital 4 as "deferred maintenance." (Countercl. ¶ 54(g)).

Viewpoint further asserts that there were contractual relationships between DLL, 3Com, and Capital 4. Viewpoint claims that on January 31, 2005, Capital 4 entered into an agreement with 3Com, called the "Strategic Alliance Agreement," under which Capital 4 would promote and exclusively use 3Com communication equipment in the Program, and 3Com would assist Capital 4 in marketing the Program and establishing relationships with 3Com resellers. (Countercl. ¶ 59-60; Ex. 5).*fn2 Viewpoint further alleges that on March 10, 2005, 3Com and Capital 4 furthered their relationship with the "Rules of Engagement Addendum to Strategic Alliance Agreement" (hereinafter "Addendum"), in which 3Com acquired the right to brand the program as its own, the "3Com Power of $Zero Solution." (Countercl. ¶¶ 67-68(f); Ex. 7). The Addendum addressed the involvement of DLL, which would remain the sole owner of equipment leased pursuant to the Program, and required Capital 4 to notify 3Com of any changes in its Rental Agreement with DLL. (Countercl. ¶¶ 68(h)-(i); Ex. 7, p. 8 ¶ 6(g)). Further, Viewpoint alleges that the Addendum provided that as long as DLL was used as the funding source, Capital 4 and 3Com value-added resellers of the Program got a 50% discount on 3Com equipment. (Countercl. ¶ 69).

According to Viewpoint, Capital 4 and 3Com entered into two additional agreements, the "Operations Agreement" and "License Agreement" on November 10, 2006. (Countercl. Exs. 3, 14). The Operations Agreement contained a "Go Dark Agreement," obligating 3Com to pay for all communication services required to be provided by Capital 4 under its existing contracts if Capital 4 could not provide those services. (Countercl. ¶ 120(f); Ex. 3, p. 12 ¶ 4.3.3(d)). Viewpoint also alleges that on February 7, 2005, DLL and Capital 4 entered into a Business Communications Program Agreement, or master program agreement, a standard form document used to establish financing arrangements for equipment vendors. (Countercl. ¶¶ 62; Ex. 6). The agreement allowed DLL to provide equipment leases in the name of Capital 4. (Countercl. ¶ 63(b); Ex. 6 § B).

Viewpoint also describes the 3Com/Capital 4 website, pursuant to the Addendum, which explained the Power of $Zero Partnership and the 3Com Power of $Zero Solution. (Countercl. ¶¶ 70-72). Specifically, the website's general terms and conditions described the relationship between the Customer Agreement and the Rental Agreement, the obligations of the customer under the Agreements, and the responsibilities of Capital 4, 3Com, and DLL under the Agreements. (Countercl. ¶ 70; Ex. 1, p. 4-7). Viewpoint suggests that this website, together with its Customer Agreement, led it to believe that the Power of $Zero Program was maintained by a "partnership" that consisted of 3Com, Capital 4, and DLL.*fn3 (Countercl. ¶ 86(k)). Viewpoint alleges that the Customer Agreement it signed with Capital 4 incorporated the general terms and conditions found on the website. (Countercl. ¶ 80, 82; Ex. 1, p. 1). The terms and conditions included a forum selection and choice of law clause choosing Texas. (Countercl. Ex. 1, p. 7.)

Viewpoint alleges that Capital 4 first proposed the 3Com Power of Zero Solution to Viewpoint on April 27, 2005. (Countercl. ¶ 76). After the sales meeting, Viewpoint claims that Capital 4 made it an offer for a six-year contract, consisting of the Customer Agreement, Schedule A (listing Viewpoint's monthly payments), and four pages of general terms and conditions from the Power of Zero website. (Countercl. ¶ 77(b), 82; Ex. 1). Viewpoint alleges that the offer was written by Capital 4 and the "Power of $Zero Partnership" and that Viewpoint did not prepare any part of the offer. (Countercl. ¶¶ 83-84). Viewpoint accepted Capital 4's offer.*fn4 (Countercl. ¶ 85). Subsequent to signing the offer, Viewpoint alleges that Capital 4 transmitted a credit application to Viewpoint, which Viewpoint completed and returned to Capital 4. (Countercl. ¶ 87-90; Ex. 10). According to Viewpoint, it did not know the identity of the equipment supplier (DLL) prior to signing the contract. (Countercl. ¶ 96(g)).

After Viewpoint signed the Customer Agreement and submitted its credit application, Viewpoint avers that Capital 4 transmitted to it the Rental Agreement, which indicated the Rental Agreement was from Capital 4 Financial Services, "A Program of De Lage Landen Financial Services." (Countercl. ¶ 91; Ex. 1 p. 8). Viewpoint signed the Rental Agreement on August 16, 2005 and alleges that it returned the Rental Agreement to Capital 4 and the Power of $Zero partnership. (Countercl. ¶ 92; Ex. 1 pp. 8-9). On or about October 12, 2005, Viewpoint alleges that DLL countersigned the Funding Agreement and returned a copy to Viewpoint. (Countercl. ¶ 93). Viewpoint further claims that on September 20, 2005, Viewpoint [sic, should be "Capital 4"] sent an invoice to DLL for $127,055.36 for the telephone equipment Capital 4 sold to DLL and shipped to Viewpoint, plus sixty months deferred maintenance at $691.16 per month. (Countercl. ¶ 105, Ex. 11). Viewpoint alleges that phone service began October 17, 2005. (Countercl. ¶ 114). Viewpoint further alleges that it in January 2006 it began receiving monthly statements from Capital 4, Inc. for the Power of $Zero Program for $3,606.65, with adjustments thereto. (Countercl. ¶ 113-15; Ex. 13). Monthly statements continued through September 15, 2007. (Countercl. ¶116).

By letter dated September 25, 2007, Capital 4 informed its customers, including Viewpoint, that it could no longer meet its obligations under the Customer Agreement, including provision of telecom services. (Countercl. ¶ 128; Ex. 16). Viewpoint alleges that on August 20, 2007, 3Com invoked its Go Dark Agreement with Capital 4, but failed and refused to pay the telecommunications service providers. (Countercl. ¶ 127). Facing the loss of such services, Viewpoint alleges that its business was in jeopardy, and it began a search for a new telecommunications services provider. (Countercl. ¶ 131). Viewpoint claims that it now pays a higher monthly amount for the same services it contracted for through the Power of $Zero partnership. (Countercl. ¶ 132).

C. Class Allegations

In addition to the allegations advanced on behalf of itself, Viewpoint alleges that it seeks the certification of the following class: "All people or entities who entered into a contract under the 'Power of $Zero,' program, or the '3Com Power of $ZeroTM' program with Capital 4, Inc., 3Com Corporation, or the 'Power of $ZeroTM Partnership.'" (Countercl. ¶ 149(a)). Viewpoint alleges that there are at least 100 and may be as many as 5,000 potential class members. (Countercl. ¶ 151). Viewpoint further asserts that its counsel represents approximately twenty- five parties who would qualify as class members. (Countercl. ¶ 157).

C. Procedural History

DLL filed its Complaint for breach of contract and unjust enrichment on February 1, 2008 (Doc. No. 1). Viewpoint filed an Answer and Counterclaim against DLL and Capital 4 on May 16, 2008 (Doc. No. 6), and DLL moved to dismiss the counterclaims (Doc. No. 9). Viewpoint filed an Amended Answer, Third Party Complaint, and Counterclaim against DLL, Capital 4, and 3Com on July 14, 2008 (Doc. No. 14). As such, this Court denied DLL's initial Motion to Dismiss as moot (Doc. No. 17). DLL filed a Motion to Dismiss the Amended Counterclaim on August 15, 2008 (Doc. No. 19). On September 30, 2008, Viewpoint filed a Motion for Joinder to join Capital 4 and 3Com as Third Party Defendants and Additional Counterclaim Defendants (Doc. No. 23), which this Court granted on October 22, 2008 (Doc. No. 27).*fn5

The counterclaims alleged by Viewpoint against DLL are as follows: Count VIII Fraudulent Misrepresentation Count IX Conspiracy to Commit Fraud Count XI Violation of Pennsylvania Consumer Protection Law Count XII Violation of Texas Consumer Protection Law Count XIII Violation of the Federal RICO statute Count XIV Request for Rescission of Contracts Count XV Violation of Texas Usury law Count XVI Violation of Pennsylvania Criminal Usury law

II. Legal Standards

A. Jurisdiction

This Court has jurisdiction over this matter pursuant to 28 U.S.C. ยง 1332 because the parties are citizens of different states and the amount in controversy exceeds the sum or ...


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